Macy’s Inc (NYSE:M) reportedly used its real estate assets as collateral to take out a loan worth $3.15 billion, which is part of the $4.5 billion that the company recently just as stores are starting to reopen.
The first quarter of 2020 was quite rough on many companies, including Macy’s due to the massive negative impact of the coronavirus, which led many of them to shut down. However, many of them are reopening their retail outlets. Macy’s recently managed to raise a total of $4.5 billion, which will reportedly be used to facilitate the reopening of its stores, inventory, and repaying debts.
Roughly $1.3 billion of the $4.5 billion that Macy’s managed to secure was raised through a bond offering. $3.15 billion was borrowed against the company’s assets. The department store chain revealed that it will use part of the raised funds to clear an existing unsecured credit line of $1.5 billion. Macy’s also revealed that it negotiated a modification of the $1.5 billion loan so that it could reduce the credit commitment. The raised funds will also be used to facilitate the company’s continued operations.
“Macy’s was in danger of running out of cash in the fall without financing,” stated David Swartz, an investment analyst at Morningstar Research Services LLC.
Mr. Swartz also noted that the recently raised funds will allow Macy’s to power through this year’s holiday season even if it achieves low sales. The latter is highly probably especially with the ongoing disruptions to normal business operations. People are still on high alert over the coronavirus, and there is also concern regarding the ongoing Black Lives Matter protests ignited by George Floyd’s murder by a police officer.
Macy’s announced in May that its sales tanked by almost 45% in Q1 this year. The company also expects its operating loss for the current quarter to be around $1 billion. Macy’s has already started reopening some of its retail outlets, but it expects the coronavirus’s economic impact to continue weighing down on sales. It will take some time before the company completely resumes its normal operations, and so the losses might be extended. Macy’s hopes that the recently raised funds will help weather the storm.